Food prices may drop as kharif harvest begins

AHMEDABAD | PUNE: The 2012-13 kharif harvesting has begun across India. Paddy, cotton, sugar, bajra, soya bean and maize are being harvested and this is likely to put pressure on prices in the coming days.

Paddy arrivals have begun at a slow pace across Punjab and Haryana where state and central procurement agencies target to procure 15.6 million tonne for the central pool in the kharif marketing season 2012-13. By October 10, supplies are expected to be at their peak, says Aseem Chabbra, deputy general manager, Food Corporation of India (FCI).

"On the first day of procurement, arrivals were very less, roughly 1,000 to 2,000 tonne. The good thing is that the moisture content is less compared to the previous year," he added.

The summer harvest is the main source for the government to bolster its rice reserves. With increased demand from ration shops and other social welfare programmes, FCI is expected to aggressively shop this year.

Similarly, cotton arrivals in India, the world's second-largest producer, have started across key growing states of Gujarat, Maharashtra and Madhya Pradesh. In Gujarat, arrivals were 2,000 bales (of 170 kg each) per day compared to 4,000 to 5,000 bales across Punjab, Haryana and Rajasthan.

This has softened the spot prices by 2%-3% to Rs 33,000 per candy (of 356 kg each). International merchants like Olam, Louis Dreyfus and Reinhart were selling forward delivery contracts at Rs 32,000 to Rs 32,500 for November and December. Cotton production for the season, which began on October 1, is expected to be 33.4 million bales this year, a fall of nearly 9% from the prior year owing to a weak monsoon.

With no major improvement in drought-like conditions after the September rainfall, the Maharashtra government has decided to advance sugar cane crushing operations.

The decision was taken by Maharashtra chief minister Prithviraj Chavan and co-operation minister Harshvardhan Patil in Pune on Monday.

Advanced crushing will result in a very low sugar recovery for mills. Cane availability has declined by about 30% from 77.1 million tonne cane crushed last year to 54.5 million tonne cane available for crushing in the current season.

A clear weather is making it ideal for farmers to harvest the crop. In Madhya Pradesh, soya bean arrivals have touched 2 lakh bags of 100 kg each, followed by Maharashtra at 25,000 bags. "Prices have corrected by 10% at Rs 3,100 per quintal," says Rajesh Agrawal, co-ordinator, Soyabean Processors Association of India. Production is expected to rise by 9% to 12.68 million tonne in the kharif season, according to the first crop estimate by SOPA.